that requires the entity to replace defective parts and Sony Company sells stereos under a 2-year warranty contract During 2020, 1,000 units were sold at P9,000 each. provide free labor on all repairs. In 2021, the entity sold an additional 900 units at P9,250 each. Sales occurred on the last day of the year for both 2020 and 2021. Based on past experience, the estimated 2-year warranty costs are P200 for parts and P250 for labor per unit. It is also estimated that 40% of the warranty expenditures will occur in the first year and 60% in the second year. Actual warranty expenditures were: 2021 2022 Stereos sold in 2020 Stereos sold in 2021 180,000 280,000 190,000 Required: 1. Prepare journal entries for 2020, 2021 'and 2022. 2. Analyze the estimated warranty liability to prove the reasonable accuracy of the balance on December 31, 2022. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2022.

that requires the entity to replace defective parts and Sony Company sells stereos under a 2-year warranty contract During 2020, 1,000 units were sold at P9,000 each. provide free labor on all repairs. In 2021, the entity sold an additional 900 units at P9,250 each. Sales occurred on the last day of the year for both 2020 and 2021. Based on past experience, the estimated 2-year warranty costs are P200 for parts and P250 for labor per unit. It is also estimated that 40% of the warranty expenditures will occur in the first year and 60% in the second year. Actual warranty expenditures were: 2021 2022 Stereos sold in 2020 Stereos sold in 2021 180,000 280,000 190,000 Required: 1. Prepare journal entries for 2020, 2021 'and 2022. 2. Analyze the estimated warranty liability to prove the reasonable accuracy of the balance on December 31, 2022. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2022.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In 2019, Shiftry Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual expenditures for 2019 and 2020 are presented below: 2019 2020 Sales 450,000 600,000 Actual warranty expenditures 15,000 30,000 What is the estimated warranty liability at the end of 2020?
Early in 2020, Oriole Equipment Company sold 400 Rollomatics at $6,600 each. During 2020, Oriole spent $20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis. (a) Prepare 2020 entries for Oriole. Assume that Oriole estimates the total cost of servicing the warranties in the second year will be $40,000. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit At SaleDuring 2020Dec. 31, 2020 At SaleDuring 2020Dec. 31, 2020 At SaleDuring 2020Dec. 31, 2020
Pythagoras Company must determine the December 31, 2021 year-end accruals for advertising and rent expenses. A P2,000 advertising bill was received on January 7, 2022. It related to costs of P1,500 for advertisements in December 2021 issues and P500 for advertisements in January 2, 2022 issues of the newspaper. A store lease effective December 16, 2020 calls for fixed rent of P4,800 per month payable 1 month from the effective date and monthly thereafter. In addition, rent equal to 5% of net sales over P1,200,000 per calendar year is payable on January 31 of the following year. Net sales for 2021 and 2020 were P2,200,000 and P1,500,000 respectively. In its December 31, 2021 statement of financial position, Pythagoras should report accrued liabilities of:
During 2019, Bonita Industries introduced a new line of machines that carry a three-year warranty against manufacturer’s defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 2% in the year after sale, and 3% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: Sales Actual Warranty Expenditures 2019 $ 1394000 $ 24000 2020 997000 38000 2021 1394000 90000 $ 3785000 $ 152000 What amount should Bonita report as a liability at December 31, 2021? $ 35820 $0 $ 75100 $ 13940
During 2020, Beautiful Company introduced a fully automatic washing machine with dryer. The sales price per unit that comes with warranty is P40,000. The company offers a three-year warranty against defects and provides service other than the agreed-upon specifications. In addition, the customers are given the option to purchase the warranty separately. If the customer opted not to buy the warranty, the washing machine with dryer is sold for P37,500. The following are the sales data (see image below).Beautiful estimates that of the total pesos spent for repairs in the warranty contracts, 20% is incurred evenly during the first warranty year, 30% evenly in the second warranty year and 50% evenly during the third warranty year. Cost of servicing the units during 2020 and 2021 were P150,000 and P300,000 respectively.How much is the Unearned Revenue from Warranty Contracts at December 31, 2021?
Milima Electronic Company sells on account printers for RM1,500 each with a 2-year warranty for performing periodic services and replacing defective parts. Because of COVID 19 pandemic, the company sold only 700 printers on December 2019, however, based on past experience, the company has estimated the total 2-year warranty costs as RM30 for parts and RM60 for labor. On 2020, Miley incurred actual warranty costs relative to 2019 printer sales of RM10,000 for parts and RM18,000 for labor. REQUIRED: (a) Record the above transactions by using the expense warranty treatment for the years 2019 and 2020. (b) If the company sold printers in cash, what are the amounts of warranty expense for 2019 and 2020? (c) Determine amounts of warranty liability that should be recorded under current liabilities and long-term liabilities for the year 2019?
Ramos Inc. must determine on December 31, 2020, year-end accruals for advertising and rent expense. A P50,000 advertising bill was received January 7, 2021, comprising cost of P35,000 for advertisement in December 2020 issues and P15,000 for advertisements in January 2021 issues of the newspaper. A store lease, effective December 16, 2019, calls for fixed rent of P120,000 per month, payable one month from the effective date and monthly thereafter. In addition, rent equal to 5% of net sales over P6,000,000 per calendar year is payable on January 31 of the following year. Net sales for 2020 were P9,000,000. Question: How much are the accrued liabilities in the December 31, 2020 statement of financial position?
Wilder Watersports Inc. sells luxury yachts and related equipment. The sale price of each yacht includes a three-year comprehensive warranty that covers all repairs and maintenance for the period. Each yacht sells for $3,000,000. A review of competitor pricing indicates that a similar warranty, if sold separately, would be valued at $10,000. On January 1, 2021, Wilder Watersports Inc. sold seven yachts. Repair costs actually incurred for these yachts were as follows: Year ended December 31, 2021 $12,000 Year ended December 31, 2022 $30,000 Year ended December 31, 2023 $35,000 Required: a. Prepare all the necessary journal entries for 2021, 2022, and 2023 to reflect the above transactions. b. Calculate the amount of unearned revenue to be reported at December 31, 2022
Ivanhoe Factory provides a 2-year warranty with one of its products which was first sold in 2020. Ivanhoe sold $909,800 of products subject to the warranty. Ivanhoe expects $124,480 of warranty costs over the next 2 years. In that year, Ivanhoe spent $73,090 servicing warranty claims. Prepare Ivanhoe's journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date 2020 During 2020 12/31/20 Account Titles and Explanation (To record sales) (To record warranty claims) Debit Credit
Early in 2020, Larkspur Equipment Company sold 600 Rollomatics at $5,800 each. During 2020, Larkspur spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All sales transactions are on a cash basis. Prepare 2020 entries for Larkspur assuming that the warranties are not an integral part of the sale (a service-type warranty). Assume that of the sales total, $58,000 relates to sales of warranty contracts.Warranty costs incurred in 2020 were $21,000. Estimate revenues to be recognized on a straight-line basis. Date Account Titles and Explanation Debit Credit